Tax code positive factors gloss up huge banks' muted earnings outcomes

Wall Street's in for a messy month.

President Trump's giant tax overhaul is scrambling the end-of-year earnings at the biggest U.S. banks, causing huge swings in profit for what would have otherwise been a muted quarter.

JPMorgan Chase, the largest bank in the USA, reported a big drop in profit on Friday for its fourth quarter - thanks largely to changes in the tax law and a major loan gone bust. Such charges could reduce the earnings the bank reports, although investors are likely to look to the core operating results since these hits will be one-time in nature.... His bank's fourth-quarter profit dropped by 40% because, unlike some other banks already enjoying the undeserved fruits of their lobbyists' labors, JPMorgan has to spend a little money to make a whole lot of money this year.

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Earnings Per Share, after the charge, came in at an adjusted $1.76 vs. $1.69 expected by experts.

Even without the tax hit, it was a generally lackluster quarter for the bank, analysts said.

JP Morgan expects its fiscal year 2018 effective tax rate to be around 19%, given the TCJA´s provision to cut the top rate of United States corporate tax from 35% to 21%, creating a positive tailwind in the quarters ahead.

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The bank also took a $143 million hit from a busted loan to Steinhoff International, a South African retailer that owns the U.S. company Mattress Firm.

Marianne Lake, the bank's CFO, called the hit the "transaction impact" of tax reform during a call with journalists on Friday morning.

Not every bank, of course, will benefit to the same extent from the tax overhaul. The bill essentially cut those liabilities down. Wells set aside $3.25 billion in legal costs relating to litigation and investigations - and doesn't see an end in sight.

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Well Fargo shares dipped 46 cents, to $62.55.

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